Julie Gordon, David Ljunggren

OTTAWA (Reuters] – On Wednesday, the Bank of Canada kept its overnight rate at 0.25%. It also maintained its guidance about a possible first increase in April 2022.

A regular rate decision statement by the central bank stated that “devastating floods” in British Columbia in the last month cut off access the country’s largest port. The Omicron coronavirus variant may also hinder economic activity.

According to it, “This could have a negative impact on growth because of supply chain disruptions that are more severe and lower demand for certain services.”

However, the report noted that Canada’s economy showed “considerable momentum” in the fourth quarter. There were high levels of job vacancies, and wages are rising.

It stated that it expected inflation to continue to be elevated during the first half in 2022. However, the central bank would ease back towards the target rate for the second half.

For seven months, headline inflation was above the central bank’s 1%–3% range. This is due to high energy prices and global supply chain bottlenecks that fueled price acceleration.

According to the central bank, “the effects of these restrictions on prices will likely take some effort due to existing supply shortages.”

The Fed reiterated its commitment to keeping rates low until the economy recovers and the 2% goal is met. It sees this happening during 2022’s middle quarters.

Canadian dollars traded almost unchanged at 1.2641 against the greenback or 79.11 U.S.cents. This reversal of gains was not unexpected.